Single Lender Vs Multi Lender Credit Distribution

Single Lender Vs Multi Lender Credit Distribution Through Point Of Sale Consumer Financing

It’s no secret that getting approved for credit can be quite a challenge, not to mention the amount of time and effort it takes to apply. However, Point of Sale financing is changing the future of financing by eliminating the middleman and the time it takes to apply for loans. Thanks to the developments in technology, merchants are able to tap into a new market and satisfy the desire consumers have for instant gratification by simply offering flexible payment plans like Buy now, pay later. 

By allowing customers to purchase the products they want without swiping credit cards or visiting the bank for approval, the credit distribution process is cut in half and the approval rates are much higher. Smoother credit distribution and higher chances of getting approved for instant loans means that your business sees more return customers and sales. But not all POS financing plans are created equal. Some rely on single lenders for loans while others use a diverse network of multi lenders, and depending on your business, the partner you choose can have a significant impact on your profits and customer retention rates.

Let’s take a deeper look at the difference between a single lender and a multi-lender credit distribution process.

Credit Distribution Using A Single Lender 

Generally, most Buy now, pay later financing partners will use a single lender for their credit distribution. In these cases, the lender is what is known as a prime lender. Unlike near-prime or subprime lenders, a prime lender is looking for low-risk borrowers. Meaning that in order to get approval for a loan, shoppers need to meet their strict criteria when filling out the application form on checkout. Prime lenders will look at various factors during the customer assessment including income, previous debts, existing debts, credit scores, and previous credit history. If an applicant fails to meet the criteria or don’t have the income to supplement the loan based on the prime lender’s requirements, they are seen as a high-risk borrower and the application is rejected. Unfortunately, this means that you as the merchant have lost the sale in the event that the shopper does not have the means to pay the total amount for your goods or services upfront. On average, 70% of applicants are turned down by prime lenders due to the applicant’s previous credit history and monthly income despite being able to afford the repayments of the loan every month. 

Credit Distribution Using A Multi Lender  

There are several shoppers who are able to afford monthly repayments but do not qualify for any credit based on the factors mentioned above. However, online financing partners who use a diverse network of multi lenders like are rapidly capturing this market and putting buying power back into the hands of consumers. A multi-lender platform caters to both high-risk and low-risk borrowers by connecting them to prime, subprime, and near-prime lenders. Should an applicant fail to meet the requirements of a prime lender, they are afforded a second opportunity to apply for the same loan with a near-prime or subprime lender. The criteria differs from those who offer prime lending solutions, which means that shoppers have a higher chance of approval due to the various options to choose from. This also means that shoppers are able to opt for the most affordable repayment options based on their budget and current financial situations regardless of their credit history or total monthly income. 

Instead of turning away 70% of applicants, you are able to accommodate more shoppers without taking on the financial risk yourself. The higher your approval rates are, the better your chances are of closing more sales and retaining more repeat customers.